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Employee benefits (also called fringe benefits, perquisites, or perks) are various non-wage compensations provided to employees in addition to their normal wages or salaries. Where an employee exchanges (cash) wages for some other form of benefit this is generally referred to as a 'salary sacrifice' arrangement.
Fringe benefits can include, but are not limited to: group insurance (health, dental, life etc.), income protection, retirement benefits, daycare, tuition reimbursement, sick leave, vacation (paid (esp. teaching) and non-paid), social security, profit sharing, funding of education and other specialized benefits.
The purpose of the benefits are to increase the economic security of employees.
The term perks is often used colloquially to refer to those benefits of a more discretionary nature. Often, perks are given to employees who are doing notably well and/or have seniority. Common perks are company cars, hotel stays, free refreshments, leisure activities on work time (golf, etc.), stationery, allowances for lunch, and – when multiple choices exist – first choice of such things as job assignments and vacation scheduling. They may also be given first chance at job promotions when vacancies exist.
United States
Employee benefits in the United States could include relocation assistance, health and dental plans; retirement benefit plans; group-term life and long term care insurance plans, legal assistance plans, adoption assistance, child care benefits and possibly other miscellaneous employee discounts (e.g. movies and theme park tickets, hotels and resorts, and so on).
Some fringe benefits (for example, accident and health plans, and group-term life insurance) may be excluded from the employee's gross income and, therefore, are not subject to federal income tax in the United States. Fringe benefits are also thought of as the costs of keeping employees other than salary. These benefit rates are typically calculated using fixed percentages that vary depending on the employee’s classification and often change from year to year.
Normally, employer provided benefits are tax-deductible to the employer and non-taxable to the employee. The exception to the general rule would include executive benefits (e.g. golden handshake and golden parachute plans) which usually exceed the IRS maximum allowed and therefore, the executive would have to pay income tax for the excess amount.
American corporations may also offer cafeteria plans to their employees. These plans would offer a menu and level of benefits for employees to choose from. In most instances, these plans are funded by both the employees and by the employer(s). The portion paid by the employees are deducted from their gross pay before federal and state taxes are applied. However, that portion would still be subject to the FICA tax.
Fringe Benefits Tax
In a number of countries (e.g., Australia, New Zealand, and India) the 'fringe benefits' are subject to the Fringe Benefits Tax (FBT), which applies to most, although not all, fringe benefits.
See also
"Employee benefit"